Breaking Up the Conglomerate, Keppel Corporation Ltd (SGX:BN4)











Keppel Corporation Ltd (SGX:BN4) is one of the STI constituents with a market capitalization of S$16.8 billion and total assets of S$30 billion.


Below are the its main business segments of the Group:


Offshore & Marine
Similar to SembCorp Marine, Keppel Offshore & Marine (O&M) is one of the largest offshore rig builder and specialized shipbuilding company. Within the business segment, the Keppel O&M has further split itself into the offshore division which is controlled by Keppel FELS; the Marine division which is represented by Keppel Shipyard and the Specialized Shipping building division led by Keppel Singmarine. As at Dec 2013, the Group has secured roughly S$3.7 billion in new contracts in the first 9 months of 2014. Net orderbook stood at S$S$12.7 billion with deliveries extending into 2019.


Keppel Infrastructure (KI) owns a series of subsidiaries through Keppel Infrastructure Holdings Pte Ltd and Keppel Telecommunications & Transportation Ltd which provide various environmental and energy engineering solutions including power generation and logistics & distribution services.


Keppel Land is the property arm of Keppel Corporation. It is also a listed subsidiary on the Singapore Exchange. With total assets amounting to S$13.5 billion as at Jun 2014, Keppel Land is both a prime office and private residential developer in key Asian cities with portfolios including Seasons City in the Sino-Singapore Tianjin Eco-City in Beijing and International Financial Centre Jakarta in Indonesia.

Despite revenue declining from S$14 billion in FY2012 to S$12.4 billion in FY2013, Keppel Corporation still maintains a robust balance sheet, enjoying a healthy liquidity profile where current ratio stands at around 1.94x. Cash plus short-term investments stood at around 16% of total assets. With total borrowings at around S$7.2 billion, this puts the Group’s total debt /equity ratio at a conservatively level of 0.72x.


Value in Action
Keppel Corporation Ltd has seen its share price corrected 16% since early Sep 2014 to around S$9.20/share. Given its current dividend yield of 4.55% and a relatlvely low P/E ratio of 9.1x, could there be any opportunity in this Singaporean conglomerate?


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All views and opinions articulated in the article were expressed in Willie’s personal capacity and do not in any way represent those of his employer and other related entities. Willie does not own any shares in the companies mentioned above.

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